Financial Analysis

Note 17 Commitments and Contingencies Legal Proceedings On March 8, 2019, Jie Yuan (the Jie Action) filed a putative shareholder derivative lawsuit in the United States District Court for the Central District of California, purportedly on behalf of the Company against its former and current CEOs and CFOs (Thanh H. Lam, Ya Ming Wong, Jeffery Chuang and Yuen Ching Ho) and directors (Charlie Huy La, Bin Liu, Umesh Patel, and Min Su) and vice president (Steven Qiang Liu) (collectively, the Defendants). The putative derivative plaintiffs sought to compel reimbursement of Nova for any judgment entered against the Company in the matter of Barney v. Nova Lifestyle, Inc. , United States District Court for the Central District of California, and for any legal fees or other costs the Company may incur in defending the Barney Action. The basis of the claims was that the Defendants caused the Company to make alleged false and/or misleading statements that gave rise to the Barney Action. In the Barney action, the putative class plaintiffs alleged that the Company artificially inflated its share price by issuing a press release announcing a strategic relationship with Shanxi Winqing Senior Care Service Group, claiming in the Companys Annual Statements on Form 10-Ks for the 2017 and 2018 fiscal years that Shanxi Winqing and Merlino Lewis LLP were among the Companys largest customers, and reporting revenues from sales transactions with these entities. Plaintiffs claimed that Shanxi Winqing wa …

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Note 11 Convertible Notes On November 18, 2025, XMax Inc., a Nevada company (the Company), entered into a Convertible Promissory Note Purchase Agreement (the Agreement) with Billiongold Holding Limited, a company incorporated under the law of Hong Kong (the Purchaser). Pursuant to the Agreement, the Company sold a Convertible Promissory Note to the Purchaser with a principal amount of $ 5,000,000 (the Note). The Note will mature on the date that is thirty-six (36) months from the date that the purchase price of the Note is paid to the Company (the Maturity Date). The Note bears interest at the rate of 6 % per annum, which is payable on Maturity Date. Any outstanding principal and interest on the Note may be converted to the shares of common stock of the Company at the holders option at a conversion price of $ 7.80 per share at any time until the total outstanding balance of the Note is paid. The Note was sold to the Purchaser pursuant to an exemption from registration under Regulation S, promulgated under the Securities Act of 1933, as amended. During the year ended December 31, 2025, the Company accrued $ 38,026 as interest expense. …

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Note 12 Income Taxes Taxes payable consisted of the following at December 31, 2025 and 2024: Schedule of Taxes Payable 2025 2024 Income tax payable - current - (1,852,399 ) As of December 31, 2025 and 2024, current tax payable were nil million and $ 1.85 million, respectively. For 2024, current tax payable, $ 1.85 million was arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below). As of December 31, 2025 and 2024, noncurrent tax payable were nil million, respectively, arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below). The (benefit) provision for income taxes on loss from continuing operations consisted of the following: Schedule of Components of Income Tax Expense (Benefit) 2025 2024 Current: Federal $ 194,021 $ - State 800 2,400 Malaysia (775,808 ) 214 Income tax expense current (580,987 ) 2,614 Deferred: Federal - - State - - Total provision expense for income taxes $ (580,987 ) $ 2,614 The following is a reconciliation of the difference between the actual (benefit) provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes from continuing operations: Schedule of Effective Income Tax Rate Reconciliation 2025 2024 Tax at federal statutory rate $ (106,257 ) $ (1,167,410 ) State and local income taxes, net of federal effect 800 - Foreign tax effe …

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Note 16 Lease On June 17, 2013, the Company entered into a lease agreement for office, warehouse, storage, and distribution space in the United States with a five year term, commencing on November 1, 2013 and expiring on October 31, 2018 . The lease agreement also provided an option to extend the term for an additional six years . On April 23, 2018, the Company extended the lease for another three years with an expiration date of October 31, 2021 . On October 15, 2021, the Company extended the lease for another five years with an expiration date of October 31, 2026 . The initial monthly rental payment is $ 42,000 with an annual 3 % increase. The Company has entered into several lease agreements for office and warehouse space in Commerce, California and showroom space in Las Vegas, Nevada and High Point, North Carolina (see Note 11) on monthly or annual terms. On July 15, 2019, Nova Malaysia entered into a sublease agreement for warehouse space with a two-year 2 term, expiring on July 14, 2021 . The initial monthly rental payment was 20,000 Malaysia Ringgit ($ 4,232 ) and was increased to 35,000 Malaysia Ringgit ($ 7,406 ) effective August 1, 2020. On July 15, 2021, Nova Malaysia extended the lease for another two years with an expiration date of July 31, 2023. Nova Malaysia did not extend this lease after July 31, 2023 . On October 29, 2019, Nova Malaysia entered into a lease agreement for a showroom with a two-year 2 term, commencing on December 1, 2019 and expiring on Novem …

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Note 10 Other Loans On June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $ 150,000 , pursuant to the Economic Injury Disaster Loan. The Loan, which was in the form of a promissory note dated June 19, 2020, matures on June 19, 2050 and bears interest at a rate of 3.75 % per annum, payable monthly beginning 12 months from the date of the promissory note. Funds from the Loan may only be used for working capital. The loan was secured by all tangible and intangible property of Diamond Bar and has accumulated interest of $ 5,332 and $ 5,473 for the years ended December 31, 2025 and 2024, respectively. On November 14, 2024, Nova Malaysia entered into a loan agreement in the aggregate amount of $ 71,286 (equivalent to Malaysia Ringgit 300,000 ) with an unrelated third party. The loan was in the form of a promissory note dated on November 14, 2024, matures on November 13, 2030 , and bears no interest. The proceed of the loan is used for working capital. On October 1, 2025, the lender forgave the loan and record it as other income. …

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New Accounting Pronouncements Recently Adopted Accounting Standards In March 2025, the FASB issued ASU 2025-02Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. The amendments in this Update are effective immediately and on a fully retrospective basis to annual periods beginning after December 15, 2024. The Company adopted the ASU in 2025. The adoption did not have a material impact on the financial statements. On July 4, 2025, the U.S. H.R.1, an act to provide for reconciliation pursuant to title II of H. Con. Res. 14. (the OBBBA) was enacted. The OBBBA introduces multiple tax law and other legislative changes, including modifications to income tax provisions such as domestic research and development expenses, capital expenditures, and U.S. taxation of international earnings; the repeal or acceleration of the sunset of certain tax credits under the 2022 Inflation Reduction Act and elimination of certain penalties for violations of certain regulatory credit programs. We have recognized the effects of the OBBBA provisions in our financial results to the extent they are applicable to the year ended December 31, 2025. We will continue to evaluate the impact of these provisions on our 2026 and subsequent consolidated financial statements, including loss of certain regulatory credit sales tied to our products and changes to the costs of our products. Recently Issued But Not Yet Adopted Accounting Pronouncements In March 2023, the FAS …

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Note 13 Related Party Transactions On September 30, 2011, Diamond Bar leased a showroom in High Point, North Carolina from the Companys former President, Chief Executive Officer and Chairperson of the Board (resigned during 2025). The lease is renewable and has been renewed each year since 2011. On April 1, 2025, the Company renewed the lease for an additional one year term at a cost of $ 41,000 . During the years ended December 31, 2025 and 2024, the Company recorded rental amounts of $ 41,000 and $ 39,390 , respectively, which were included in selling expenses. On January 4, 2018, the Company entered into a sales representative agreement with a consulting firm, which is owned by the former President, Chief Executive Officer and Chairperson of the Board, for sales representative service for a term of two years . On January 4, 2020, the Company renewed the agreement for an additional two years which was amended in July 2020. If not terminated during the first year, the agreement will continue until one party or the other terminates the agreement with 30 days written notice. The Company agreed to compensate the consulting firm via commission at predetermined rates of the relevant sales amount. During the years ended December 31, 2025 and 2024, the Company recorded $ 315,119 and $ 331,106 for the years ended December 31, 2025 and 2024 as commission expense to this consulting firm, respectively. In February 2024, the Company entered into a loan agreement in the aggregate amount …

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Note 15 Geographical Analysis Geographical distribution of sales consisted of the following for the years ended December 31, 2025 and 2024: Schedule of Revenue by Geographic Areas 2025 2024 Geographical Areas North America $ 8,717,307 $ 9,435,936 Hong Kong 7,919,662 - Other countries 85,734 251,039 Revenues $ 16,722,703 $ 9,686,975 Geographical location of identifiable long-lived assets as of December 31, 2025 and 2024: Schedule of Long-lived Assets by Geographic Areas 2025 2024 Geographical Areas North America $ 660,003 $ 1,281,203 Asia - 413,302 Total $ 660,003 $ 1,694,505 …

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Note 2 - Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding financial reporting. The audited consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. Reverse split On May 22, 2023, the Company filed a Certificate of Change with the Secretary of State of Nevada with an effective date of May 22, 2023, at which time a 1-for-5 reverse stock split of the Companys authorized shares of common stock, par value $ 0.001 , accompanied by a corresponding decrease in the Companys issued and outstanding shares of common stock (the Reverse Stock Split). All references to shares and per share data have been retroactively restated to reflect such split. Amendments to Articles of Incorporation On September 5, 2023, the Company filed the Certificate of Change (the Amendment) with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to increase the amount of authorized shares of its common stock, par value $ 0.001 per share, from 3,000,000 to 250,000,000 . The Amendment was approved by the Companys Board of Directors (the Board) on June 28, 2023 …

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Note 14 Stockholders Equity On May 28, 2021, the Companys stockholders approved the Companys 2021 Equity Incentive Plan (the 2021 Plan) at its annual shareholders meeting. The 2021 Plan was approved by the Board of Directors of the Company on April 12, 2021 and has a total of 600,000 shares of the Companys common stock which may be granted as stock reward to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of the Companys business. On June 16, 2021, the Company filed Form S-8 to register the 600,000 shares of the Companys common stock under the 2021 Plan. On August 31, 2023, the Companys stockholders approved the Companys 2023 Equity Incentive Plan (the 2023 Plan) at its special shareholders meeting. The 2023 Plan was approved by the Board of Directors of the Company on June 28, 2023 and has a total of 800,000 shares of the Companys common stock which may be granted as stock reward to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of the Companys business. On December 15, 2023, the Company filed Form S-8 to register the 800,000 shares of the Companys common stock under the 2023 Plan. On May 31, 2024, the Companys stockholders approved the Companys 2024 Equity Incentive Plan (the 2024 Plan) at its annual shareholders meeting. The 2024 Plan was approved by the Board of Directors of the Company on April 19, 2024 and has a total o …

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Note 18 Subsequent Events The Company has evaluated subsequent events through April 14, 2026, the date of the issuance of the consolidated financial statements, and identified the following material subsequent event. On January 28, 2026, XMax Inc., a Nevada company (the Company or Lender) entered into a Loan Agreement (the Loan Agreement) with Joycheer Trade Limited, a company incorporated in Hong Kong (the Borrower). Pursuant to the Loan Agreement, the Lender agreed to provide the Borrower with a loan in an aggregate principal amount of $ 5.3 million (the Loan). The Loan bears interest at a rate equal to 6 % per annum and matures on the date that is one year from the funding date of the Loan. The Loan Agreement contains customary representations and warranties, and events of default. On February 4, 2026, Xmax Beta Holdings Ltd. (the Company ), a company incorporated in the Cayman Islands and an indirectly wholly owned subsidiary of XMax Inc. entered into a Subscription Agreement (the Agreement ) with Preamble X Capital I, a series of Preamble X Capital LLC, a Delaware Limited Liability Company. Pursuant to the Agreement, the Company made additional subscription in an aggregate amount of US$ 3,048,773.60 (the Subscription Amount ), which increases the Companys interest in Preamble X Capital I to approximately 99.9 %. Allocations Fund Administration, LLC is the administrative manager of Preamble X Capital I. The applicable management fee percentage for the Company is 0 %. On F …

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